If “thirty is the new twenty,” which I friggin’ hope it is, since I’m turning 35-years-old this summer, then $600,000 is the new $500,000 when it comes to freehold houses in Toronto.
I don’t want to say, flat out, that you can’t get a freehold home for $500,000 in Toronto, but it’s getting tougher and tougher to find houses that are even priced that low, let alone sell for anything close to that.
So if you find yourself in this camp, you’re going to have to make a sacrifice, or two, or three.
Let’s go through a list of items you NEED to evaluate before, and during, your search for an entry-level home in Toronto…
If you’re a would-be home-buyer in Toronto, heed my warning: do not watch the TV show called “House Hunters.”
There’s nothing worse than losing in a 12-offer melee on that $599,000 listing at Coxwell & Danforth, then going home and watching people shop for 4-bed, 4-bath houses for $175,000 in Orlando, Florida.
The worst part is: the people are picky! We’re watching this show thinking, “Damn, son, come to T-Dot and see what $175,000 gets you. A parking space at Trump Towers, maybe”
And here are these picky, critical, and often rude buyers saying, “I really don’t like the yellow wall-colour,” as if they’ve never met this guy:
If you’re looking to buy an entry-level house in Toronto right now, and you’re well-informed, you’re probably aware that $600,000 is the new “magic mark” (not to be confused with Magic Mike…), as it’s getting increasingly tough to find anything in the $500’s
Some of you reading this might follow, “It’s getting increasingly tough to find anything in the $600’s as well,” but it all depends on what you’re looking for.
When I meet with a new buyer, I tell them the brutal truths about the Toronto real estate market.
Why set them up for disappointment?
Buying a freehold property in Toronto isn’t easy, no matter what price point you’re in. Over $3,000,000 right now? Take your pick. But for the rest of the market, multiple offers and over-asking are the norm.
The “bottom end” of the Toronto freehold market could be anything from $500,000 – $700,000, and while I know that’s a massive gap, it all depends on what your expectations are.
So when looking for something entry-level, for those that are scratching and clawing to get there, I tell them, rather plainly, “You have to make one major concession, and quite possibly two.”
From there, I explain the following, outlining several compromises and concessions they can make:
This has to come first. It just has to.
When we’re talking about location, we can almost break it down into sub-categories. But basically we’re talking about location as it pertains to proximity to TTC, proximity to a “main drag,” and the overall style and demographic of the neighbourhood.
If you took a house that was a half-block south of Danforth Avenue, and compared it to a house that was between Gerrard & Dundas, there would be a massive premium for the former, not just because it’s close to transit, but because Danforth Avenue is that “main drag” of commercial and retail.
Take a look at this map:
People want to be close to the Danforth, at the north end, and they want to be close to Queen Street, at the south end.
But that box in the middle? That’s what a lot of my buyers refer to as “no man’s land,” since it’s in the middle, has inferior access to transit, and inferior commercial/retail.
Make no mistake – I’m not dissing this area. In fact, it offers a tremendous amount of value, and I have clients on Ivy Avenue, Bloomfield Avenue, and Woodfield Avenue – all of whom bought there because it was cheaper.
So if you’re willing to give up being “steps to trendy Queen Street,” then maybe that $630,000 house is only $575,000 if it’s just north of Gerrard Street East.
2) 3-Bedroom vs. 2-Bedroom
Outside of location, this is the biggest decision you have to make.
And more and more of my $600’ish clients are putting this before location.
It’s not necessarily a matter of how big you want your house to be today, or how many children you have to fill those bedrooms today (most of my buyers have none) but rather whether or not you want to move again in 3-5 years if you need the space for a second child, or your spouse’s home gym…
I tell my clients rather bluntly, “You do not want to call me in three years, tell me you need to find a bigger house, and then pay me 5% to sell your house, and pay land transfer tax to the the provincial and municipal governments.”
So here is where the compromises start to come into play.
If you can buy a gorgeous, fully-renovated, 2-bed, 2-bath house on a nice street for $650,000, or you can buy a 3-bed, 2-bath house, on a lesser street, in not-as-good shape for the same price, which one do you take?
The responses would be split 50/50 on that, and thus my job keeps me on my toes…
This one is pretty simple – you either have parking, or you don’t, and it can save or cost you $50,000.
The hierarchy of parking goes as follows:
1) Private Driveway
2) Garage w/Lane Access
3) Front Pad Parking
4) Mutual Drive w/Backyard Parking
5) No Parking
Debate whether a mutual drive is more coveted than parking via lane access (which happens to have a garage), but that’s basically your most common parking options in Toronto.
The houses we’re talking about for $600’ish on the east side will usually have lane parking, or no parking. You see the odd front parking pad, but it’s not exceptionally common.
Then comes the houses that advertise having parking on MLS, when in fact the house has a mutual driveway whereby you can fit a bicycle, Smart Car, or Ford Model T from the early 1900’s when these damn things were built.
You can get two street parking permits, per household, on most of these streets.
While I leave the decision-making up to my buyers, I tell them one of the first things on this list they should scratch is owned parking.
4) Finished Basement
This is yet another thing I would go without, for two reasons:
1) It takes around $50,000 off the price of the house
2) It gives you the opportunity to add value later.
As with everything on this list, we can do a “what if the house had blank” scenario, and in this case, a $700,000 house with a finished basement might only cost you $650,000 if the basement is unfinished, and just used for laundry, and storage.
So ask yourself if you “need” the finished basement now, and I’m sure the answer is a resounding “no.”
If you’re coming from a condo, or a rental, chances are good that you’re in less than 800 square feet, and now suddenly you’re looking at two floors, 3-beds, and 1,400 square feet with a backyard. You don’t “need” the space in the finished basement, at least, not today.
When you have kids? Sure, it would be great to have a play room.
But if it makes the difference between being able to buy today, or having to save more and buy in a year when prices will undoubtedly be higher, then spend less money on a house with an unfinished basement, and get into the market.
Plus, if you spend $30,000 renovating the basement in five years when you have the money, you’re probably adding $50,000 in value.
5) Second Bathroom
The second bathroom will more than likely be in that finished basement we just talked about, so these two go hand-in-hand.
Many buyers for $600’ish houses are couples coming from 2-bed, 2-bath condos, where he uses one bathroom, and she uses the other, and they live together in harmony in part because of that arrangement!
So suddenly when you’re looking at 3-bed, 1-bath houses with an unfinished basement, you feel like you’re giving something up.
Just remember that the basement can be finished one day, and that your 3-bedroom house is a better investment than your 2-bed, 2-bath condo, and it’s what you’re going to grow into.
6) Lot Size
Some of my buyers immediately look at the lot size when they first eye the listing.
And then, some of my buyers don’t give it a single thought.
Take a set of buyers to a house have them walk the lot, and then ask them “How deep do you think this is?” They could be off by 100 feet – many have no clue. 50 feet? 100 feet? 200 feet?
For those folks, lot size is just a number. Like age.
Some of you might have thought, “Oh give it a rest” when I complained about turning 35-years-old this year, and some of you might be happy that I have ten years on you. It’s a matter of perspective.
So while some of my buyers can say, “I grew up on a 2-acre farm outside Guelph,” and they can’t imagine spending $600,000 on a 15 x 80 foot piece of land, others couldn’t possibly care less.
It’s what the lot has that is important.
Does it have a backyard? Or does it just have a back-deck that’s built to the lot line?
7) Semi-Detached vs. Detached
I put this one last because, honestly, if you think you’re getting a detached house for $600,000, then you have set the bar really, really high.
But this does come into play sometimes, along with the other criteria on the list.
Think about a detached bungalow on a small lot, versus a 2-storey semi-detached on a deeper lot. Some folks want the freedom and potential of the detached house, and some want the interior square footage of that 2-storey semi-detached, today.
Personally, I think buyers in this price point need to accept that they’re getting a semi-detached house from the onset, and be pleasantly surprised if they get a steal in the form of a detached.
As you can see from this list, you have to play one item off the other, over and over again.
Take a semi-detached, with front pad parking, 2-bed, 2-bath, with a finished basement, on a short 80-foot lot, and then compare it to a detached, no parking, 3-bed, 1-bath, unfinished basement, on a deep 120-foot lot.
Which one would you rather have?
Now throw location into the mix, and you can really have fun.
Every buyer I put into a $600’ish house these days has to make concessions, and what concessions those buyers think they’re going to make at the onset, might not be the ones they make in the end.
It’s important to get out and start looking at houses, and get a feel for those items noted above. Some of the decisions might have to be made right away, and others can often wait until you’re looking at a potential house.
But if you want to get into a house for $600,000 in Toronto these days, don’t ask yourself what you want, but rather, what you can do without…